APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA D.C. Civil No. 77-4252
Before Hunter, Weis, Circuit Judges, and Fisher,*fn* District Judge.
1. Appellant, Leon Rosen, challenges the denial of his pension application by the Hotel and Restaurant Employees and Bartenders International Union Pension Fund (hereinafter "International Fund"). The district court, 494 F. Supp. 521, ruled that the International Fund correctly denied Rosen's application because he lacked the fifteen years of credited service required for benefits under the pension plan. We find that Rosen's lack of credited service was caused by his employer's failure to contribute to the pension fund as required under the pension agreement. Further, we hold that under the fiduciary duty standards outlined in the pension agreement, the defendants had a duty to notify Rosen when his employer's contributions to the fund were in arrears and a duty to take action against that employer for continued refusal to contribute to the fund. We therefore reverse and hold that Rosen is entitled to full pension benefits.
2. Plaintiff, Leon Rosen, worked in Philadelphia's Walnut House Restaurant from 1958 to 1974 and continued his employment at the Towne Talk Restaurant until 1976. During this entire period he was a dues paying member of the local union; until 1975 that union was the Chef, Cooks, Pastry Cooks and Assistants Union, Local 111 (hereinafter Local 111). In 1975, Local 111 merged into the Hotel and Restaurant Employees and Bartenders International Union of Philadelphia, Bucks, Montgomery and Delaware Counties, Pennsylvania, Local 274 (hereinafter Local 274).
3. In 1967, pursuant to a collective bargaining agreement, Local 111 created the Local 111 pension fund.*fn1 Under the pension agreement, benefits were provided to those union members who attained the age of sixty-two years and accumulated fifteen years of "credited service." In determining whether an employee's service is "credited" under the plan, two time frames were used; for periods prior to the adoption of the plan (pre-1967), an employee was credited with one year of service for each uninterrupted year in which he was a dues paying member of the union. For periods after the adoption of the pension plan (post-1967), an employee was given one year of credited service for each 1,600 hours of work for which his employer made contributions to the fund.*fn2
4. In 1971 defendant Civatte, Trustee of the Local 111 pension fund, advised Rosen that his pension benefits were in jeopardy because his employer had not been contributing to the pension fund since its inception in 1967. In addition, Civatte gave Rosen a tabulation of his employer's total arrearages to the fund over the past four years $419.20. Rosen paid this amount personally and Civatte deposited the check into the account of the Local 111 pension fund. It is unclear whether Civatte represented that by paying his employer's arrearages Rosen could preserve his pension eligibility. The testimony conflicts, and the trial court did not make any findings on the question. Nevertheless, at this point Rosen assumed his pension eligibility was intact.
5. In 1975, Local 111 merged into Local 274 of the International Union and on July 9, 1975 the Local 111 pension plan was incorporated into the defendant International Union Pension Fund. The International Fund assumed all the assets and liabilities of Local 111 pension plan but defendant Civatte did not become Trustee of the successor fund.
6. In 1975, after seventeen years of membership with the Union, Rosen submitted his application to the International Fund for pension benefits. On May 18, 1976 the Fund denied appellant's request stating that according to its records he had a total of fifteen years of credited service, but had not reached the minimum retirement age of sixty-two years. The Fund recommended that Rosen continue working until his sixty-second birthday and then reapply.
7. Rosen reapplied for pension benefits in June 1976 and his request was rejected for a second time. On this occasion, the International Fund responded, contrary to what it said in its letter of May 1976, that Rosen did not have fifteen years of credited service because his employer had not remitted contributions on his behalf from October 1967 to November 1971 and that his subsequent employer had not remitted contributions for the period February 1974 to May 1975. The International Fund rejected Rosen's 1971 payment to Civatte, as an attempt to cure his employer's arrearages. Herman Leavitt, Chairman of the Fund's legal committee, advised Rosen that employers' contributions to the Fund must be made by the employer; "there is no provision in the pension plan to allow for payment of contributions to the Fund by an employee for the purpose of acquiring credited service toward a pension benefit."*fn3 The International Fund returned the $419.20 payment to Rosen with five percent interest compounded annually.*fn4
8. After the International Fund's second refusal of his pension request, Rosen filed suit in the Pennsylvania Court of Common Pleas against the International Fund, Local 274 and Civatte. The defendants removed the case to the Eastern District of Pennsylvania pursuant to the general federal removal statute, 28 U.S.C. § 1441 (1976). Rosen filed a motion for summary judgment in which he argued that his employer's failure to make payments from 1967 to 1971 may be a technical bar to recovery, but that the defendants were estopped to assert this defense because Civatte had promised Rosen that personal payment would bring his pension up-to-date. Civatte denied saying that a personal payment by Rosen would cure any pension defects, but admitted meeting with the plaintiff, discussing his employer's arrearages, presenting Rosen with a tabulation of the outstanding debt and depositing Rosen's personal check into the Local 111 pension fund account. The district court recognized the basis for an estoppel argument, but denied the summary judgment motion because there was a question as to what representations Civatte actually made in 1971.
9. At trial, the court held that the International Fund's determination was not arbitrary and capricious and denied Rosen's pension request. In so ruling however, the court never decided the estoppel question left open by the motion for summary judgment. Rather, it assumed an estoppel and hence that Rosen's pension was up-to-date in 1971. But the court found no evidence that any employer contributions had been made on Rosen's behalf from 1971 to 1973; therefore he was still two years short of the required fifteen. In response, Rosen argued that during this time defendants had a duty to notify him of his employer's continued failure to contribute to the Fund and further, that their fiduciary duty ...